Yellen’s visit to China is aimed at easing tensions amid deep divisions

The last time a US Treasury secretary visited China, Washington and Beijing were embroiled in a trade war, the Trump administration was preparing to label China a currency manipulator, and relations between the two countries had rattled global markets.

Four years later, Treasury Secretary Janet L. As Yellen prepares to arrive in Beijing, many of the economic policy concerns between the U.S. and China remain — or have intensified — despite the less hostile tone of the Biden administration.

For Chinese goods, President Donald J. Trump’s tariffs are still in place. President Biden has been working to limit China’s access to critical technologies such as semiconductors. New restrictions are emerging to limit US investment in China.

Treasury Department officials Mrs. They have dampened expectations for major breakthroughs in Yellen’s four-day visit, which begins when she arrives in Beijing on Thursday. They suggest his meetings with senior Chinese officials are aimed at improving communication between the world’s two largest economies. But tensions remain high between the United States and China, and talks between Ms. Yellen and her colleagues will be difficult. He met with China’s ambassador, Xie Feng, in Washington on Monday, and the two officials had a “candid and constructive discussion,” according to the Treasury.

Here are some of the contentious issues that have sown divisions between the US and China.

Chinese officials are still cautiously watching the Biden administration’s 2022 decision to place significant limits on shipments of advanced semiconductors and chip-making machinery to China. Those limitations hamper China’s efforts to develop artificial intelligence and other types of advanced computers that are expected to help advance each country’s economy and military.

And the Biden administration is mulling more restrictions on U.S. investments in advanced chips and advanced Chinese technology.

Semiconductors have always been one of the largest and most valuable categories of US exports to China, and although the Chinese government has invested heavily in its domestic capacity, it lags years behind the US.

The Biden administration’s subsidy plan to bolster the U.S. semiconductor industry has also rankled Chinese officials, particularly as it includes restrictions on investment in China. Companies that accept US government money to build new chip facilities in the US are barred from making new, high-tech investments in China. Beijing took another swipe on Monday, announcing restrictions on exports of certain minerals used in the production of some chips.

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While Chinese officials — and some U.S. manufacturers — hope the Biden administration will raise tariffs on hundreds of billions of dollars in Chinese imports, that doesn’t appear to be starting. Ms. While Yellen has questioned the effectiveness of the tariffs, other top officials in the administration see the tariffs as helpful in encouraging supply chains to move out of China.

Management uses both carrots and sticks to implement a “de-risking” or “friend-shoring” policy.

Companies doing business in China are increasingly concerned about attracting negative attention from the government. The most recent target is US memory chip maker Micron Technology, which failed a Chinese security review in May. The move could prevent Micron from selling to Chinese companies that run critical infrastructure Approximately eighth The company’s global revenue is at risk. In recent months, consulting and advisory firms in China with foreign ties have faced a crackdown.

US officials are increasingly concerned about the Chinese government’s use of economic coercion against countries like Lithuania And AustraliaAnd they work with European authorities and other governments to coordinate their responses.

Businesses are also spooked by China’s ever-tightening national security laws, which include a tough counter-espionage law that came into force on Saturday. Foreign businesses in China are reevaluating their operations and the market information they collect because the law is vague about what is prohibited.

“We think this is very ill-advised, and we have told many members of the government here,” said the US ambassador to China, R. Nicholas Burns said in an interview in Beijing.

In the United States, companies with ties to China, such as social media app TikTok, shopping app Temu and clothing retailer Sheen, are facing increased scrutiny over their labor practices, use of US customer data and methods of importing products. United Nations.

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China’s currency, the renminbi, has often worried U.S. officials, who have sometimes accused Beijing of artificially weakening its currency.

The renminbi’s recent weakness may be the toughest issue for Ms. Yellen. The currency has fallen more than 7 percent against the dollar and nearly 13 percent against the euro in the past 12 months. That decline makes China’s exports less competitive in the United States. China’s trade surplus in manufactured goods already represents about one-tenth of the output of the entire economy.

The renminbi isn’t the only one falling against the dollar recently – the Japanese yen has fallen for a variety of reasons, including rising interest rates in the US as the Federal Reserve tries to curb inflation.

Chinese economists have also blamed that factor for the renminbi’s weakness. John Yubo, a senior economist at the Shanghai Academy of Social Sciences, said the renminbi’s decline was a direct result of the central bank’s recent interest rate hikes.

At the same time, China has been cutting interest rates to help its ailing economy. The interest rate banks charge each other for overnight loans — a benchmark that affects all other interest rates — is now more than 5 percent in New York and 1 percent in Shanghai. This reverses a long-standing pattern of high interest rates in China.

The central bank’s rate hikes have made it more attractive for companies and households to send money out of China and invest in the U.S., despite Beijing’s strict limits on foreign currency transfers.

China pledged as part of its Phase One trade deal with the US three years ago that it would not seek an advantage in trade by devaluing its currency. But the Biden administration’s options may be limited if China allows its currency to weaken anyway.

China has provided more than $500 billion to developing countries through its lending program, making it one of the world’s largest lenders. Many of those borrowers, including several African countries, have struggled economically since the pandemic and face the prospect of defaulting on their loans.

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The United States, along with other Western countries, has been pressuring China to allow some of those countries to restructure their debt and reduce the amount they owe. But for more than two years, China has forced other lenders and multilateral lenders to absorb financial losses as part of any restructuring, stalling the debt relief process and threatening to push millions of people in developing countries deeper into poverty.

In June, international lenders including China agreed to a debt relief plan with Zambia that would give it a grace period on interest payments and extend the due dates on its debts. The arrangement does not require the World Bank or the International Monetary Fund to write off any debt, global policymakers Ms. People like Yellen hope for similar debt restructuring in poor countries.

Tensions over national security and human rights have created an environment of mutual mistrust and spilled over into economic relations. The flight of a Chinese surveillance balloon over the United States this year deeply unnerved the American public, and members of Congress are pressing the administration to reveal more about the balloon. Mr. Xi called Chinese President Xi Jinping a “dictator”. Biden’s recent branding has rankled Chinese officials and state-run media.

US officials remain concerned about China’s human rights abuses, including its crackdown on the pro-democracy movement in Hong Kong and its detention of mainly Muslim minorities in northwest China’s Xinjiang region. A senior Treasury Department official, Ms. Yellen, who spoke on condition of anonymity before her trip, said the US did not want to shy away from her views on human rights during meetings in China.

Chinese officials continue to protest various US sanctions against Chinese companies, organizations and individuals for national security threats and human rights abuses. Sanctions against Li Shangfu, China’s Defense Minister. The Chinese government has cited those sanctions as one reason for rejecting high-level military talks.

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